COMPETITION TRIBUNAL OF SOUTH AFRICA
Case No.: 93/LM/SEP07
In the matter between:
CAPITAL ALLIANCE LIFE LIMITED Primary Acquiring Firm
and
INVESTEC EMPLOYEES BENEFIT LIMITED Primary Target Firm
_______________________________________________________________
Panel : DH Lewis (Presiding Member), N Manoim (Tribunal
Member), and Y Carrim (Tribunal Member)
Heard on : 23 October 2007
Order issued on: 23 October 2007
Reasons issued on: 25 October 2007
REASONS FOR DECISION
APPROVAL
[1] The Competition Tribunal issued a Merger Clearance Certificate on 23 October
2007, approving without conditions the proposed merger between Capital Alliance Life
Limited and Investec Employees Benefit Limited.
DESCRIPTION OF THE TRANSACTION
[2] The primary acquiring firms are Capital Alliance Life Limited (“CAL”), Liberty
Group Limited (“Liberty”) and Standard Bank Group Limited (“Standard Bank”) 1, and
1 CAL is a wholly owned subsidiary of Capital Alliance Holdings Limited (“CAHL”) which is a
wholly owned subsidiary of Liberty; Liberty which is controlled by Standard Bank
Investec Employee Benefits limited (“IEB”) is the primary target firm. 2
[3] IEB is a very small insurer and is currently reinsured with CAL, a bigger
insurer.3 In terms of the proposed transaction, CAL will acquire certain of the existing
life insurance policies underwritten by IEB. 4
[4] According to the merging parties the existing reinsurance arrangement is no
longer optimal. The acquisition will reduce the administrative and financial burden of
the existing arrangement by allowing CAL to obtain control and unfettered discretion to
deal with the policies of IEB.
THE RELEVANT MARKET
[5] It is common cause between the merging parties and the Commission that the
relevant product market is long term insurance, and the relevant geographic market is
national.
[6] Long term insurance comprises of the underwriting of risks, administration of
insurance policies and investment management of premiums received from policy
holders. The merging parties in their competitive report indicate that this transaction
does not affect the investment management function in respect of IEB because the
investment asset underlying the policies implicated in this transaction had already been
previously transferred to CAL as reinsurance premium.
COMPETITION EVALUATION
[7] Premerger CAL has a market share of 15% calculated on the basis of total
policy liability, and 16% calculated on the basis of total net premium. IEB has less
than 1% market share calculated on either basis. Post merger the merged entity will
2 IEB is a wholly owned subsidiary of Investec Employee Holdings Limited (“IEHL”) which is
controlled by Investec Limited (“Investec”)
3 Reinsurance occurs when a small insurer (usually facing risks themselves) undertake cover
for the policies that they have issued to policyholders for the same risk with another large
insurer, so as to pass on the risk to the bigger insurer
insurer, so as to pass on the risk to the bigger insurer
4 This entails the transfer of direct rights and obligations to policy holders in respect to existing
policies already reinsured by CAL, and does not include any staff or assets for the underwriting
of new business
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have a market share of 16% based on policy liabilities and 17% based on the total net
premiums in the relevant market. The market share accretion as a result of the merger
is clearly very low. In addition, the merged entity will continue to face effective
competition from large players such as Old Mutual, Sanlam and Momentum.
CONCLUSION
[8] Given the above, we are satisfied that the proposed transaction is unlikely to
result in a substantial lessening or prevention of competition in the long term insurance
industry, and no public interest issues arise. We accordingly approve the proposed
transaction unconditionally.
_______________
Y Carrim
Tribunal Member
D Lewis and N Manoim concur in the judgment of Y Carrim
Tribunal Researcher: L Xaba
For the merging parties : Werksmans
For the Commission : L Khumalo
(Mergers and Acquisitions)
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